The rich should be clobbered with higher taxes to stop Britain returning to Victorian levels of inequality, a major report by a Labour think tank has warned.

The Fabian Society has called for higher earners to be hit with a National Insurance hike to pay for more generous universal benefits.

The controversial study warns that a radical overhaul of the tax and benefits system is needed to lift around one in five people out of poverty.

It accuses Labour of failing to tackle poverty and warns that Britain is on the 'tipping' point of a return to Victorian-style social segregation.

Back to the future: Piccadilly Circus in Victorian times. The fabian Society says inequality in the modern age is the worst it has been since the late 1800s

The Labour-affiliated body will propose removing the current national insurance contributions ceiling, meaning that people earning more than £43,888 see their NIC bills rocket from 1per cent to 11per cent.

The report says that while the rich should be soaked, the middle classes should continue to receive state help such as tax credits.

It warns that Conservative plans to switch state help away from the middle income earners to the poor will backfire.

They warn that moving away from universal benefits would create a "them and us" society, leading to less public money being spent on the poor because people on middle incomes would not support it.

The two-year 'Solidarity Study', due to be published next week, calls on all political parties to sign up to a "poverty prevention strategy" for the next 30 years amid fears recession-fuelled cuts could hit the poor further.

It also proposes that people should be forced to do 'socially useful work' in return for unemployment benefits with automatic state help restricted to pensioner.

The authors, Tim Horton and James Gregory, accept that Labour has made real progress in tackling poverty since 1997.

But, while poverty among children and pensioners has been reduced, it has risen among adults without children - especially those on out-of-work benefits.

With all three main parties committed to cut spending to reduce the huge deficit in the public finances, the authors have warned that the battle against poverty will suffer.

Mr Horton, the Fabian Society's research director, said: 'We could be at a tipping point that sends Britain back towards Victorian levels of inequality and social segregation, and makes the solidarity which could challenge that social segregation ever more difficult to recover.

Then and now: Just as poverty is comparable now to Victorian times, the busyness of London Bridge remains the same, only buses and cars have replaced carriages

'Inequality in Britain today, on some measures, is at its highest since the early 1960s. And, despite falls in poverty over the last decade, progress is getting harder.

'Significant cuts in welfare spending would push poverty and inequality even higher. And taking the middle class out of the welfare state would set Britain on a path to a set of 'sink services' for the poorest, with a deeply segregating effect on society.

'History teaches us that nothing would be worse for the long-term interests of the poorest than taking the middle classes out of the services that the most vulnerable rely on.'

Mr Horton said Labour was 'hitting the limits of progress' with its current strategy and called for more redistribution of wealth from rich to poor.

He added: 'The Government risks running out of public permission for any deeper attack on poverty.

'The idea was that using tough language about crackdowns on benefit cheats would make clear that the money was being used well and increase support for tackling child poverty.